This prediction market topic addresses whether Canada will experience a recession before the end of 2026. A recession is typically defined as a significant decline in economic activity spread across the economy, lasting more than a few months. The market resolves based on two specific, formal criteria. The primary criterion is an official declaration by the C.D. Howe Institute's Business Cycle Council, Canada's recognized arbiter of business cycle dates. The secondary, technical criterion is two consecutive quarters of negative real GDP growth, a common rule-of-thumb definition used internationally. The question is timely due to significant economic headwinds, including elevated inflation, high household debt, rising interest rates set by the Bank of Canada, and global economic uncertainty. Investors, policymakers, and businesses are closely monitoring indicators to gauge the risk of a downturn, as a recession would impact employment, corporate profits, government finances, and household welfare. The period leading to 2027 is seen as a critical window where the cumulative effects of monetary tightening and potential external shocks could tip the economy into contraction.

Historical Context

Canada's last officially declared recession occurred in 2020 during the COVID-19 pandemic, a sharp but brief downturn induced by public health lockdowns. Prior to that, the country experienced a significant recession during the 2008-2009 global financial crisis, where real GDP contracted for three consecutive quarters. The early 1990s saw a prolonged and severe recession, partly driven by high interest rates to combat inflation and government fiscal consolidation. The C.D. Howe Institute's Business Cycle Council dated that recession as lasting from April 1990 to May 1992. The early 1980s also featured back-to-back recessions in 1981-1982. Historically, Canadian recessions have often been synchronized with downturns in the United States, its largest trading partner, though commodity price cycles have also triggered independent slumps, such as in 2015-2016 when oil prices collapsed. The current economic environment shares some similarities with past pre-recession periods, featuring aggressive monetary tightening, as seen in the early 1980s and 1990s, and high household debt levels, a vulnerability that amplified the 2008-2009 downturn.

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